Bitcoin fell as much as 20 percent on Wednesday, piercing below $10,000, while other cryptocurrencies took similar spills due to investor fears that regulators could clamp down on them in an effort to curb speculation.
The world’s biggest and best-known cryptocurrency at one point lost 30 percent of its value since Tuesday. Bitcoin, despite some stabilization in late U.S. trading, was half its record peak of almost $20,000 set on the Luxembourg-based Bitstamp exchange a month ago, Reuters reported.
Ethereum and Ripple, the No. 2 and No. 3 virtual currencies, tumbled after reports South Korea and China could ban cryptocurrency trading, sparking worries of a wider regulatory crackdown.
“Despite the fact that bitcoin has almost halved from its peak of $19,800 reached mid-December, it still remains 1100 per cent higher than it was 12 months ago,” City Index’s Simon Revington said in an email. “However, we could be seeing an important loss of momentum, especially given that Bitcoin hasn't traded above $15,000 since Tuesday. $10,000 level is an important junction because it is a huge psychological level.” Mr. Revington was quoted on Reuters.
It’s unclear why bitcoin has had a rough week. Cryptocurrency markets are unpredictable.
“Volatility is quite common in the cryptocurrency world,” said Mati Greenspan, a Tel Aviv-based analyst at investment firm eToro, on Tuesday. Mr. Greenspan was quoted on CNN.
Many of those new investors know little about the underlying technology and have little experience investing in highly volatile investments like bitcoin. As long as the price was going up, they were happy to continue holding or even buy more. But when the price starts to drop, some of them inevitably lose their nerve and panic-sell, accelerating the price decline.
The big question is what will happen after this shake-up is over. We might find out that the run-up of the last few months was a purely speculative boom, in which case Bitcoin might never recover its earlier highs. On the other hand, people might see bitcoin’s low price – at least compared to a few days ago – as a buying opportunity, causing bitcoin’s price to start rising once again.